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Why Is McKesson (MCK) Up 13% Since the Last Earnings Report?
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A month has gone by since the last earnings report for McKesson Corporation (MCK - Free Report) . Shares have added about 13% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
McKesson Beats Earnings Estimate in Q4, Revenues Miss
McKesson reported fourth-quarter fiscal 2017 (ended Mar 31, 2017) earnings of $3.39 per share, beating the Zacks Consensus Estimate of $3.04. Earnings also came above the year-ago figure of $2.44.
Revenues improved 4% year over year to $48.7 billion but failed to meet the Zacks Consensus Estimate of $49.7 billion.
Quarter in Detail
McKesson operates through two segments – Distribution Solutions and Technology Solutions. All growth rates given below are on a year-over-year basis.
At Distribution Solutions, revenues increased 5% to $48.2 billion. North America pharmaceutical distribution and services reported sales of $40.6 billion, up 5%, reflecting market growth and acquisitions. Revenues were hit by branded to generic conversions. Revenues from International pharmaceutical distribution and services were up 12% to $6.1 billion. Medical-Surgical distribution and services generated sales of $1.6 billion, up 9%.
However, revenues from the Technology Solutions business fell from $734 million in the year-ago quarter to $512 million. Quarterly revenues were affected by the decline in hospital software business. Financial Condition
As of Mar 31, 2017, McKesson had $2.8 million in cash and cash equivalents against $24.2 million as of Dec 31, 2016. During full-fiscal 2017 (ended Mar 31, 2017) the company generated cash amounting to $4.7 billion from operations. Also in fiscal 2017, McKesson paid $4.2 billion for acquisitions, repurchased $2.3 billion of its common stock, repaid approximately $1.6 billion in long-term debt, and paid $253 million in dividends.
Fiscal 2018 Outlook
McKesson expects earnings per share in the range of $11.75 to $12.45 for fiscal 2018. Distribution Solutions business revenue growth is expected to increase by mid-single digits year over year. The upside is expected to be driven by market growth and acquisitions. Revenues from Technology Solutions are expected to be down on a year-over-year basis.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.
At this time, McKesson's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is McKesson (MCK) Up 13% Since the Last Earnings Report?
A month has gone by since the last earnings report for McKesson Corporation (MCK - Free Report) . Shares have added about 13% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
McKesson Beats Earnings Estimate in Q4, Revenues Miss
McKesson reported fourth-quarter fiscal 2017 (ended Mar 31, 2017) earnings of $3.39 per share, beating the Zacks Consensus Estimate of $3.04. Earnings also came above the year-ago figure of $2.44.
Revenues improved 4% year over year to $48.7 billion but failed to meet the Zacks Consensus Estimate of $49.7 billion.
Quarter in Detail
McKesson operates through two segments – Distribution Solutions and Technology Solutions. All growth rates given below are on a year-over-year basis.
At Distribution Solutions, revenues increased 5% to $48.2 billion. North America pharmaceutical distribution and services reported sales of $40.6 billion, up 5%, reflecting market growth and acquisitions. Revenues were hit by branded to generic conversions. Revenues from International pharmaceutical distribution and services were up 12% to $6.1 billion. Medical-Surgical distribution and services generated sales of $1.6 billion, up 9%.
However, revenues from the Technology Solutions business fell from $734 million in the year-ago quarter to $512 million. Quarterly revenues were affected by the decline in hospital software business.
Financial Condition
As of Mar 31, 2017, McKesson had $2.8 million in cash and cash equivalents against $24.2 million as of Dec 31, 2016. During full-fiscal 2017 (ended Mar 31, 2017) the company generated cash amounting to $4.7 billion from operations. Also in fiscal 2017, McKesson paid $4.2 billion for acquisitions, repurchased $2.3 billion of its common stock, repaid approximately $1.6 billion in long-term debt, and paid $253 million in dividends.
Fiscal 2018 Outlook
McKesson expects earnings per share in the range of $11.75 to $12.45 for fiscal 2018. Distribution Solutions business revenue growth is expected to increase by mid-single digits year over year. The upside is expected to be driven by market growth and acquisitions. Revenues from Technology Solutions are expected to be down on a year-over-year basis.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.
McKesson Corporation Price and Consensus
McKesson Corporation Price and Consensus | McKesson Corporation Quote
VGM Scores
At this time, McKesson's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.